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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
FITBUG LIMITED, Plaintiff, v. FITBIT, INC., Defendant.
)) ) ) ) ) ) ) ) ) ) ) ) )
Case No. 13-1418 SC ORDER ON MOTIONS FOR SUMMARY JUDGMENT
I. INTRODUCTION
Now before the Court are two motions for summary judgment in
this trademark infringement and unfair competition case. First,
Plaintiff Fitbug Ltd. ("Fitbug") seeks partial summary judgment on
likelihood of confusion; Defendant Fitbit, Inc.'s ("Fitbit")
affirmative defense of laches; and Fitbit's fifth and sixth
counterclaims. ECF No. 47-3 ("Fitbug Mot."). Second, Fitbit moves
for summary judgment on two affirmative defenses: laches and
acquiescence. ECF No. 50 ("Fitbit Mot."). Both motions are fully
briefed,1 and appropriate resolution without oral argument under
1 ECF Nos. 61-3 ("Fitbit Opp'n"); 65-3 ("Fitbug Opp'n"); 71-3 ("Fitbit Reply"); 74 ("Fitbug Reply").
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Civil Local Rule 7-1(b). Relatedly, Fitbit has filed an objection
to reply evidence under Civil Local Rule 7-11(b) or, in the
alternative, a motion to file supplemental briefing. ECF No. 81
("Fitbit Obj."). Fitbug opposes that request. ECF No. 83. For
the reasons set forth below, Fitbug's motion for summary judgment
is GRANTED IN PART and DENIED IN PART. Fitbit's motion for summary
judgment is GRANTED. Fitbit's objection to reply evidence is
DENIED, but the alternative motion for leave to file supplemental
briefing is GRANTED.
II. BACKGROUND
Fitbit and Fitbug both produce portable electronic fitness
tracking devices. These devices are wearable, and collect data
about a user's steps walked, calories burned, activity intensity,
sleep, and other health and fitness metrics. Portable electronic
fitness tracking devices also connect to the internet or a user's
computer or smartphone, and, in conjunction with an application or
website, allow the user to view and analyze the data collected, set
or track fitness goals, and collect other information relevant to
the user's health and fitness plans.
Fitbug owns two federal trademark registrations, and Fitbit
also owns a federal trademark registration.
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There have been several variations of the parties' logos throughout
their history, but the relevant logos are:
Fitbug's original designs: Fitbit's original design:
Fitbug's current design: Fitbit's current design:
Fitbug, headquartered in the United Kingdom and founded in
2004, was one of the first companies to enter the portable
electronic fitness tracker market. Since that time, Fitbug has
made both sales directly consumers ("business-to-consumer" sales),
and so-called "business-to-business-to-consumer" sales of its
products. Business-to-business-to-consumer sales include sales to
health insurance plans, corporate wellness programs, and other
programs, and generally involve incentives like bulk discounts as
well as special tools for tracking group fitness goals or running
fitness competitions. Initially, Fitbug focused on the British
market, but in 2005 it sought to sell its products in the United
States as well. Since that time, however, Fitbug's success in the
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United States market has been limited.
Fitbit, headquartered in San Francisco, is one of the leading
providers of portable electronic fitness trackers. James Park and
Eric Friedman founded the company in March 2007. Fitbit's name was
chosen after a poll on Facebook, and at the time the name was
chosen, as far as Park is aware, nobody at Fitbit was aware of
Fitbug's existence. ECF No. 46-5 ("Park Decl.") ¶¶ 4-6. However,
by December 2007, prior to the launch of Fitbit's website or the
sale of its first products, Friedman sent Park a link to the Fitbug
website, although Park contends that he thought little of the link
at the time. Id. ¶ 7.
Fitbit first announced its products on September 9, 2008. By
the next day, Fitbit's website featured information regarding its
first device, the Fitbit Classic, as well as a link for businesses
or individuals to place orders for the devices. Id. ¶ 13; Ex. 5.
Nonetheless, Fitbit did not begin shipping its products until
September 2009, and early on, only a small amount of Fitbit's sales
were in the business-to-business-to-consumer category. However,
over time Fitbit's sales grew substantially both in general and in
the business-to-business-to-consumer market.
The day Fitbit announced its product, Fitbug received several
emails and other contacts stating that Fitbit was entering the
portable electronic fitness tracking device market. Additionally,
a representative of Fitbug sought (unsuccessfully) to contact
Fitbit to explore a potential business partnership. Over the next
weeks and months, internal communications show that Fitbug was
concerned about potential competition from Fitbit, and was
contemplating various responses including sending a cease and
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desist letter. See ECF No. 46 ("Wakefield Decl.") Exs. 17-23.
Nevertheless, Fitbug did not assert any violation of its trademark
rights at that time. Instead, Fitbug first assert infringement of
its rights by Fitbit in a December 2011 letter. Park Decl. at ¶
26; Ex. 11. Fitbit denied infringement, and subsequent letters
failed to resolve the dispute. Id.
Fitbug filed suit on March 29, 2013 alleging trademark
infringement under 15 U.S.C. Section 1114(1), unfair competition
under 15 U.S.C. Section 1125(a), common law trademark infringement
and unfair competition, violations of the California Business and
Professions Code Section 17200, and seeking cancellation of
Fitbit's trademark registration. See ECF No. 1 ("Compl."). Fitbit
counterclaimed, alleging unfair competition and false or misleading
advertising under California law. ECF No. 43 ("Am. Answer &
Counter-Cls.") at ¶¶ 189-255.
Now, both parties have filed motions for summary judgment
seeking to resolve significant portions of these claims. The
matter is currently set for trial beginning on February 9, 2015.
III. LEGAL STANDARD
Entry of summary judgment is proper "if the movant shows that
there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law." Fed. R. Civ. P.
56(a). Summary judgment should be granted if the evidence would
require a directed verdict for the moving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). The moving party
bears the initial burdens of production and persuasion. Nissan
Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099,
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1102 (9th Cir. 2000).
IV. DISCUSSION
Fitbug moves for summary judgment on three issues. First,
Fitbug believes the Court should find as a matter of law that they
have demonstrated a likelihood of confusion among consumers.
Second, Fitbug argues that laches do not bar its claims. Finally,
Fitbug seeks summary judgment on Fitbit's unfair competition and
false advertising claims on the grounds that that Fitbit lacks
statutory standing to bring those claims.
Fitbit opposes these arguments and moves for summary judgment
in its own right arguing that Fitbug's claims are barred by laches,
and, in any event, Fitbug's claims are barred by its acquiescence
to Fitbit's use of the Fitbit mark. Because the Court finds that
Fitbug's claims are barred by laches, the Court need only address
that issue and Fitbit's unfair competition and false advertising
claims.
A. Laches
Fitbit's primary argument is that Fitbug's claims are barred
by laches. "Laches is an equitable time limitation on a party's
right to bring suit, resting on the maxim that one who seeks the
help of a court of equity must not sleep on his rights." Jarrow
Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir.
2002) (internal citations and quotation marks omitted). Laches is
a defense to both Lanham Act claims (including trademark
infringement and unfair competition) as well as to California state
law claims. Id.; Saul Zaentz Co. v. Wozniak Travel, Inc., 627 F.
Supp. 2d 1096, 1109 (N.D. Cal. 2008); see also
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Bridgestone/Firestone Research, Inc. v. Auto. Club De L'Ouest De La
France, 245 F.3d 1359, 1362, 1364 (Fed. Cir. 2001) (holding that a
petition for cancellation of registered trademark was barred by
laches). A claim is only barred by laches if the defendant can
show "(1) unreasonable delay by plaintiff in bringing suit, and (2)
prejudice . . . ." Miller v. Glenn Miller Prods., Inc., 454 F.3d
975, 997 (9th Cir. 2006) (citing Couveau v. Am. Airlines, Inc., 218
F.3d 1078 (9th Cir. 2000)).
Two issues determine whether a delay was unreasonable. "First
[a court] assess[es] the length of delay, which is measured from
the time the plaintiff knew or should have known about its
potential cause of action." Jarrow, 304 F.3d at 838. Next, the
Court must "decide whether the plaintiff's delay was unreasonable."
Id. The Court will address each in turn.
First, the Court must determine when Fitbug "knew or should
have known about its potential cause of action." Id. This
standard can be satisfied by either actual or constructive
knowledge, because "[c]ompanies expecting judicial enforcement of
their marks must conduct an effective policing effort." Grupo
Gigante Sa De CV v. Dallo & Co. Inc., 391 F.3d 1088, 1102 (9th Cir.
2004) (emphasis omitted). Nonetheless, a trademark holder is "'not
required to constantly monitor every nook and cranny of the entire
nation and to fire both barrels of [its] shotgun instantly upon
spotting a possible infringer.'" adidas Am., Inc. v. Kmart Corp.,
No. CV-05-120-ST, 2006 WL 2044857, at *8 (D. Or. June 15, 2006)
(quoting Cullman Ventures, Inc. v. Columbian Art Works, Inc., 717
F. Supp. 96, 127 (S.D.N.Y. 1989)).
The undisputed facts are as follows. Fitbit announced its
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products on September 9, 2008 and began receiving significant media
coverage. Park Decl. ¶ 10. By the next day, Fitbit's website was
active and visitors to the site could see Fitbit's trademark, learn
about its products, and place an order for the original Fitbit
device. Id. ¶ 13, Ex. 5. Beginning that day and continuing for
some time after, individuals within and outside the Fitbug
organization contacted Fitbug to point out Fitbit's entry in the
market. Those emails refer to Fitbit as, among other things,
"[a]nother competitor," suggest aspects of Fitbit's user interface
are a "total ripoff," and note that while Fitbit's entry into the
market is "[n]othing to panic about, . . . [Fitbit] will become an
issue and I'd rather be one step ahead." Wakefield Decl. Exs. 9-
17. In reference to Fitbit's announced products and user
interface, a consultant wrote to Paul Landau, Fitbug's CEO, that
Fitbit "appears to be doing what Fitbug does but slightly
more . . ." and noting that Fitbit "appear[s] to only be available
in the US." Id. Ex. 14.
Over the next several months, Fitbug explored several
potential responses to Fitbit. First, beginning two days after
Fitbit announced its products, Fitbug's Chief Marketing Officer
("CMO") (unsuccessfully) attempted to contact Fitbit to discuss
potential partnerships. Id. Exs. 17, 20. Then, on October 14, in
an email conversation with the CMO, an attorney said, "I was
wondering if they were infringing on your IP -- sounds like some
improvements on your idea, but pretty close to [F]itbug including
the name." Id. Ex. 19. A month later a Fitbug employee wrote to
Landau "to remind [him] of Fitbit" because he was "thinking of
sending them a cease and desist." Id. Ex. 21. Around the same
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time, Landau referred to Fitbit as "thieving bastards[.]" Id. Ex.
23.
Nevertheless, Fitbit did not begin shipping its products to
consumers until September 2009. After that point, Fitbug received
several further emails regarding Fitbit's activities. For
instance, another lawyer contacted Fitbug's CMO to point out that
Fitbit "could cause confusion in the classic trademark sense." Id.
Ex. 31.
That statement -- that Fitbit's mark could cause consumer
confusion -- is the crucial issue for determining when Fitbug knew
or should have known of its potential cause of action. "The
essence of . . . a [trademark infringement] claim centers on the
likelihood of confusion between two marks or products." Internet
Specialties W., Inc. v. Milon-DiGiorgio Enters., Inc., 559 F.3d
985, 990 (9th Cir. 2009). As a result, when we ask whether Fitbug
or another trademark owner "knew or should have known" of its
potential cause of action, what we are really asking is when the
mark holder "knew or should have known about the likelihood of
confusion between" the marks. Id.
The Ninth Circuit's answer to this question in Internet
Specialties is instructive. In that case, the parties were
internet service providers with similar names ("ISWest.com" and
"ISPWest.com"). Id. at 988. ISWest became aware of ISPWest's
existence shortly after ISPWest registered its domain name in late
1998. Id. At that time, the two companies offered somewhat
different services -- ISWest offered dial-up and high-speed access
nationwide, while ISPWest initially provided only dial-up access in
Southern California. Id. According to ISWest's CEO, the company
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was not concerned about ISPWest at the time (even though they were
aware of its existence) because ISPWest did not offer high speed
internet and because the highly volatile internet startup market
meant that ISPWest might well go out of business. Id. Instead,
ISWest waited to file suit alleging trademark infringement until
2005, after ISPWest had expanded into a provider of nationwide,
high-speed internet access. Id. Despite this gradual expansion
into the high speed internet market, the Ninth Circuit found that
the laches period started in 1998. The court noted that even
though ISPWest "did not offer DSL in 1998, both companies did offer
internet access, e-mail, and web hosting in the same geographic
area under remarkably similar names," and thus "[a] prudent
business person should recognize the likelihood of confusion to
consumers under such circumstances . . . ." Id. at 990-91.
In this case, the Court finds that Fitbug knew or should have
known of the likelihood of confusion by, at the latest, September
2008, after Fitbit's launch. While Fitbit was not yet shipping its
products, at that time, Fitbit was selling similar devices "in the
same geographic area under [a] remarkably similar name[] . . . ."
Id. at 990. As a result, a prudent business person should have
recognized the likelihood of confusion at that point. See id.
Fitbug argues essentially for a per se rule that the laches
period can never run "prior to the defendant's actual sale of its
goods or services." Fitbug Opp'n at 8. There are several problems
with that proposal. First, it is undisputed that Fitbit was
selling its product in September 2008; it simply had not shipped
the products yet. Park Decl. ¶ 13 ("On September 9 or September
10, 2008, Fitbit's website . . . . contained a description and
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images of the Fitbit fitness tracker and invited any potential
customer to order the product by clicking a prominent "BUY"
button.") (emphasis added).
Moreover, Fitbug's support for this rule rests on two flawed
premises. First, Fitbug argues that "concrete evidence" of several
of the likelihood of confusion factors in AMF Inc. v. Sleekcraft
Boats, 599 F.2d 341, 348-49 (9th Cir. 1979) (the "Sleekcraft
factors") was lacking in September 2008 (and is lacking in all pre-
sale trademark infringement cases). But, as the Ninth Circuit has
stated, "each [Sleekcraft] factor represents only a facet of the
single dispositive issue of likely confusion," and need not be
satisfied in every case or mechanically applied. Entrepreneur
Media, Inc. v. Smith, 279 F.3d 1135, 1141 (9th Cir. 2002); see also
Downing v. Abercrombie & Fitch, 265 F.3d 994, 1008 (9th Cir. 2001)
("Although these are all factors that are appropriate for
consideration in determining the likelihood of confusion, they are
not necessarily of equal importance, nor do they necessarily apply
to every case."). Thus, even if evidence were lacking on the
marketing channels and proximity of goods at sale factors, the two
factors Fitbug specifically identified as lacking evidence in
September 2008, that would not have barred a finding of likelihood
of confusion at that time. Similarly, Fitbug's point that
"evidence of widespread actual consumer confusion was not available
until 2012" is misplaced, because actual confusion is not required
to demonstrate a likelihood of confusion. See Network Automation,
Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1151 (9th Cir.
2011); see also Pfizer Inc. v. Sachs, 652 F. Supp. 2d 512, 523
(S.D.N.Y. 2009) ("The absence of proof of actual confusion is not
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fatal to a finding of likelihood, particularly where, as here, the
junior mark has been in the marketplace for a relatively short
period of time.") (citations and internal alterations omitted).
Fitbug's second argument, that between September 2008 and
September 2009 (when Fitbit first shipped its products) and it
appeared possible that Fitbit would go out of business, is
irreconcilable with the purpose of laches. As Judge Learned Hand
wrote in the copyright context: it is inequitable for the owner of a copyright, with full notice of an intended infringement, to stand inactive while the proposed infringer spends large sums of money in its exploitation, and to intervene only when his speculation has proved a success. Delay under such circumstances allows the owner to speculate without risk with the other's money; he cannot possibly lose, and he may win.
Haas v. Leo Feist, Inc., 234 F. 105, 108 (S.D.N.Y. 1916); see also
Danjaq, 263 F.3d at 951 (discussing Hand's justification for laches
in the trademark context). Here too, Fitbug's argument is that it
should be permitted to wait and watch, with full knowledge of
Fitbit's allegedly infringing use, as Fitbit invested substantial
sums of money in advertising and building up goodwill in its
allegedly infringing brand, only to intervene once those
investments panned out. That result is not just inequitable, it is
also inefficient, and renders this argument untenable. See also
Grupo Gigante, 391 F.3d at 1102-03 (noting that "the plaintiff
'cannot simply wait without explanation to see how successful the
defendant's business will be and then ask for an injunction to take
away good will developed by defendant in the interim.'") (quoting 5
McCarthy on Trademarks § 31:14, at 31-50).
The Court concludes that Fitbug had actual knowledge of its
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potential causes of action against Fitbit in September 2008. As a
result, the length of Fitbug's delay runs for approximately four
and a half years until it filed suit in March 2013.
Even though Fitbug delayed approximately four and a half years
before filing suit, that does not end the inquiry. See Internet
Specialties, 559 F.3d at 991. Instead, the Court must still decide
whether Fitbug's delay in bringing suit was reasonable. Id.
In assessing whether a plaintiff's delay was reasonable, the
Court looks to the limitation period for the most analogous state
law cause of action. Jarrow, 304 F.3d at 837. If Fitbug's claims
were "filed within the analogous state limitation period, the
strong presumption is that laches is inapplicable; if the claim is
filed after the analogous limitations period has expired, the
presumption is that laches is a bar to suit." Id. (collecting
cases); see also Internet Specialties, 559 F.3d at 990; Miller, 454
F.3d at 997.
The parties dedicate a significant amount of attention to the
question of what the most analogous cause of action is to trademark
infringement and unfair competition in California law, and what the
statute of limitations is for such claims. For years, the Ninth
Circuit and district courts in California have almost universally
assumed the answer is the four-year limitation periods contained in
California Code of Civil Procedure Sections 337 or 343. See, e.g.,
Internet Specialties, 559 F.3d at 990 n.2; Miller, 454 F.3d at 997
n.11; DC Comics v. Towle, 989 F. Supp. 2d 948, 971-72 (C.D. Cal.
2013); RSI Corp. v. IBM Corp., No. 5:08-cv-3414-RMW, 2012 WL
3277136, at *13 (N.D. Cal. Aug. 9, 2012); Experexchange, Inc. v.
Doculex, Inc., No. C-08-03875 JCS, 2009 WL 3837275, at *19 n.23
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(N.D. Cal. Nov. 16, 2009); ATM Express, Inc. v. ATM Express, Inc.,
Civ. No. 07cv1293-L(RBB), 2009 WL 2973034, at *3 (S.D. Cal. Sept.
11, 2009); Miller v. Glenn Miller Prods., 318 F. Supp. 2d 923, 942
n.11 (C.D. Cal. 2004), aff'd 454 F.3d 975, 997 & n.11 (9th Cir.
2006); but see Internet Specialties W., Inc. v. ISPWest, No. CV 05-
3296 FMC (AJWx), 2006 WL 4568073, at *1 (C.D. Cal. Nov. 14, 2006),
aff'd sub nom. Internet Specialties W., Inc. v. Milon-DiGrigorio
Enters., Inc., 559 F.3d 985 (9th Cir. 2009) (rejecting the
defendant's argument that the three-year period under California
Code of Civil Procedure Section 338(d) applied because the case
involved trademark infringement, and not false and deceptive
advertising under 15 U.S.C. Section 1125(a)(1)(B)); High Country
Linens, Inc. v. Block, No. C 01-02180 CRB, 2002 WL 1998272, at *2
n.1 (N.D. Cal. Aug. 20, 2002) (applying the two-year period in
California Code of Civil Procedure Section 339 to common law
trademark infringement claims). However, Fitbit points out that
none of these cases actually analyze the question in depth, and in
nearly all the cases applying a four-year limitation, the parties
agreed that using the four-year period was appropriate.
Instead, Fitbit argues that the Ninth Circuit's references to
the four-year limitations period in Miller and Internet Specialties
overlooked important California precedent bearing on the statute of
limitations for trademark infringement and is inconsistent with
both California law and prior Ninth Circuit precedent.
Specifically, Fitbit argues that because the California Supreme
Court stated in Mission Imports, Inc. v. Superior Court, 31 Cal. 3d
921, 931 (Cal. 1982), that "action[s] for trademark infringement
sound[] in tort," the two-year limitations period for tort claims
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in California Code of Civil Procedure Section 339 applies. See
also Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 719-20
(9th Cir. 2004) (applying Montana law and concluding that because a
claim for state trademark infringement "generally sounds in tort,"
Montana's three-year statute of limitations for unspecified tort
actions applied); High Country Linens, 2002 WL 1998272, at *2 n.1
(finding that "common law trademark infringement claim[s] [are]
also limited by Cal. Civ. Proc. Code § 339" in part because of
Mission Imports' holding that an "action for trademark infringement
sounds in tort").
While the Court believes that Fitbit's argument is
meritorious, and that the line of cases assuming the four-year
limitation period in Section 343 is applicable to trademark
infringement and unfair competition claims is questionable, the
Court need not resolve this issue. Because the Court previously
found that the laches period began four and a half years before
Fitbug filed suit, Fitbug's claims are presumptively untimely even
under the four-year period it urges. Accordingly, the Court
presumes that Fitbug's claims are untimely. See Saul Zaentz, 627
F. Supp. 2d at 1113. Nevertheless, the Court must still "consider
the validity of the reasons proffered by the plaintiff to excuse
its delay and overcome the presumption of laches." Id.
First, Fitbug argues that the doctrine of progressive
encroachment justifies its delay. "'Under this doctrine, the
trademark owner need not sue in the face of de minimis infringement
by the junior user.'" Tillamook, 465 F.3d at 1110 (quoting
Prudential Ins. Co. of Am. v. Gibraltar Fin. Corp. of Cal., 694
F.2d 1150, 1154 (9th Cir. 1982). "Instead, a trademark owner's
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obligation to sue arises when the junior user redirects or expands
its business into different regions or markets bringing it into
direct competition with the trademark owner." Saul Zaentz, 627 F.
Supp. 2d at 1114 (citing Tillamook, 465 F.3d at 1110); see also
Grupo Gigante, 391 F.3d at 1103 ("A defendant can encroach on a
plaintiff's mark by expanding its business into different regions
or different markets."). Nevertheless, "[a] junior user's growth
of its existing business and the concomitant increase in its use of
the mark do not constitute progressive encroachment." Tillamook,
465 F.3d at 1110.
Specifically, Fitbug argues that the doctrine of progressive
encroachment applies because Fitbit expanded into the so-called
'business-to-business-to-consumer' market "no earlier than mid-
2011, less than two years before Fitbug filed suit." Fitbit Opp'n
at 9. As explained earlier, the business-to-business-to-consumer
market is made up of health insurance plans and corporate wellness
programs, among others, and makes up a significant (although not
always the majority, see Wakefield Decl. ¶¶ 5, 9, Ex. 4 at
Interrog. No. 18, Ex. 8) share of Fitbug's sales.
Fitbug bases its view of Fitbit's alleged progressive
encroachment on the declaration of its CEO, Paul Landau, who
contends that: "[f]rom 2008 through the [sic] mid-2011, it was the understanding of myself and others at Fitbug2 that Fitbit
2 Landau's description of Fitbit's activities throughout the relevant period is insufficient to create an issue of material fact as to Fitbit's activities because Landau's testimony on those issues would be inadmissible. See Fed. R. Civ. P. 56(c)(4); Orr v. Bank of Am., NT & SA, 285 F.3d 764, 773 (9th Cir. 2002) ("A trial court can only consider admissible evidence in ruling on a motion for summary judgment.") (citations omitted).
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was focusing its distribution efforts on the direct to consumer channel . . . . [and] to the extent Fitbit was selling its products through the [business-to-business-to-consumer] market, (a) its distribution was in the form of offering bulk discounts to [business-to-business-to-consumer] customers, (b) such sales were almost exclusively a result of potential [business-to-business-to-consumer] customers reaching out to Fitbit as opposed to Fitbit initiating marketing contact, and (c) Fitbit was not providing Add-On Services to its [business-to-business-to-consumer] customers.
Landau Decl. ¶ 18. Fitbug describes "Add-On Services" as
including, among other things, collecting and analyzing additional
data for business-to-business-to-consumer customers, creating
separate web pages for business-to-business-to-consumer users, and
offering additional exercise games or challenges in which fitness
groups may participate. Id. at ¶ 5. "To Fitbug, if a distributor
of activity trackers to [business-to-business-to-consumer]
customers was not providing Add-On Services to these customers,
that distributer [sic] was effectively not a participant in the
[business-to-business-to-consumer] market and as a result, not a
competitor of Fitbug." Id. at ¶ 18. Furthermore, Fitbug points
out that Fitbit did not add a "Corporate Wellness" link on its
website, which specifically targets the business-to-business-to-
consumer market, until April 2012. Finally, Fitbug contrasts
Fitbit's business-to-business-to-consumer sales in 2009, which were
only a small percentage of Fitbit's overall sales, with its 2013
business-to-business-to-consumer sales, which accounted for
substantially larger percent of Fitbit's sales. ECF No. 66
("Rosenberg Decl.") Ex. 6.
The problem with this view is that Fitbit's growth in the
business-to-business-to-consumer market was simply the growth of
its existing business, not expansion into a new market. Even
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drawing all justifiable inferences in Fitbug's favor, see Anderson,
477 U.S. at 255, the undisputed facts show that Fitbit was selling
its products directly to consumers and businesses from the outset.
Park Decl. ¶ 28. Furthermore, Fitbit hired an independent
contractor in 2008 in an effort to develop additional business-to-
business-to-consumer sales. ECF No. 46-9 ("McDonough Decl.") at ¶¶
3-6. Additionally, it is also undisputed that Fitbit received
inquiries from and made sales to business-to-business-to-consumer
customers from its inception. Id. at ¶ 7. While Fitbug points out
that Fitbit's sales in the business-to-business-to-consumer market
have grown substantially, it is also undisputed that Fitbit had
sales in that market since its inception. As the Ninth Circuit has
said, "growth alone does not infringement make," Prudential Ins.,
694 F.2d at 1154, and all phases of Fitbit's business grew rapidly
from the beginning, including its business-to-business-to-consumer
sales. See Wakefield Decl. at Ex. 7.
Nor do the facts support Fitbug's view that Fitbit's initial
use of its mark was de minimis. On the contrary, Fitbit's use of
its mark was substantial from the outset, and Fitbit received both
national and international media attention at the beginning. Park
Decl. ¶¶ 12-13, 34. In short, this media attention and prominent
use of the mark (as well as Fitbug's internal response) demonstrate
that even if "[Fitbug] may have had no obligation to sue a small
one-shop brick and mortar infringer, [Fitbit's] use of the mark was
not de minimis." Saul Zaentz, 627 F. Supp. 2d at 1115.
Further underscoring these conclusions, two years before
Fitbug argues Fitbit entered the business-to-business-to-consumer
market, Fitbug knew or should have known the two companies were
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directly competing in that market. First, Fitbug's CEO admits that
in 2009 Fitbug and Fitbit were competing directly to provide a
fitness program for several schools. ECF No. 67 ("Landau Opp'n
Decl.") ¶ 8. Similarly, although the program was to take place in
Europe and Fitbug's CEO was apparently unaware of Fitbit's
participation, representatives of Oracle UK (a prospective
business-to-business-to-consumer customer) copied Landau, Fitbit
CEO James Park, and representatives of several other portable
electronic fitness tracking device companies on the same emails
regarding a potential corporate wellness program. Id. at ¶¶ 10-11;
Park Decl. ¶¶ 23-25 & Exs. 9-10. Even though Fitbug's CEO states
he was personally unaware of that instance of direct competition in
the business-to-business-to-consumer market, "[h]ad [Fitbug]
conducted further investigation, as a reasonable person would have
done . . . , it would have discovered that [Fitbit]" had been
directly competing with Fitbug in the business-to-business-to-
consumer market from the outset. Saul Zaentz, 627 F. Supp. 2d at
1112.
Also undermining Fitbug's argument is its artificial and
cramped description of the relevant market. Fitbug states that, in
its view, unless another portable electronic fitness tracker
company was providing similar Add-On Services to those Fitbug
provided, that company was effectively not a competitor in the
business-to-business-to-consumer market. But Fitbug offers no
objective explanation for why this is the case, and in any event, a
close reading of the Ninth Circuit's progressive encroachment cases
shows that expansion into a "different market" requires something
more than simply expanding existing marketing channels or
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increasing sales in an area closely related to the junior mark
holder's existing business.
Take, for instance, the Ninth Circuit's analysis of
progressive encroachment in Tillamook Country Smoker, Inc. v.
Tillamook Community Creamery Association. In Tillamook, the
plaintiff was a cheese company suing a defendant smoked meat
company, both located in Tillamook County, Oregon. 465 F.3d at
1105. While the cheese company was aware of the meat company from
the outset, it did not sue until twenty-five years later, once the
meat company began selling its products in supermarkets -- a move
the cheese company argued constituted progressive encroachment.
Id. at 1105, 1110. The Ninth Circuit disagreed, finding that the
meat company's expansion into supermarket sales was not an
expansion into a different region or different market, but rather
"growth of its existing business and the concomitant increase in
its use of the mark . . . ." Id. at 1110. In so doing, the
Tillamook court noted that if the meat company had "'expanded its
business' into selling cheese in grocery stores, it would be a
different story." Id.; see also Internet Specialties, 559 F.3d at
991 (expanding from localized sales of dial up service to
nationwide DSL service was "a natural growth of . . . existing
business); Grupo Gigante, 391 F.3d at 1103 (rejecting progressive
encroachment where the plaintiff was aware of a potential conflict
but chose to wait to bring suit until the conflict was actual);
Saul Zaentz, 627 F. Supp. 2d at 1115 (finding the move to internet
sales "was the natural outgrowth of [the defendant's] existing
business," and "the fact that [plaintiff's] internet sales predate
[defendant's] sales is immaterial").
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Similarly, in this case, any expansion into the business-to-
business-to-consumer market (no matter how that market is
constituted) was simply the natural growth of Fitbit's existing
business. If Fitbit had only entered the portable electronic
fitness tracking market after several years of marketing distinct
products, the Court might reach a different conclusion. But here,
Fitbit was selling the same type of products, to the same type of
customers, with the actual or constructive knowledge of Fitbug from
2008 through 2011 and beyond. See Grupo Gigante, 391 F.3d at 1103
(rejecting a progressive encroachment claim where defendant's use
of the mark did not change over the relevant period); accord 6
McCarthy on Trademarks & Unfair Competition § 31:20 (4th ed.)
("Progressive encroachment denotes some change in direction, such
as expansion into different territories or into a different type of
business. It must be something more than a normal expansion in
quantity within its original line of business that most businesses
will experience over time."). In short, the undisputed facts
simply do not support Fitbug's view that Fitbit's subsequent
activities constituted a move into the "same or similar market
area" or placed Fitbit "more squarely in competition with
[Fitbug]," because the companies were already squarely competing in
the same or similar market area beginning in 2008. Opp'n at 10
(quoting Kellogg Co. v. Exxon Corp., 209 F.3d 562, 573 (6th Cir.
2000)).
Despite the presumption in favor of laches and Fitbug's
inability to show progressive encroachment, the Court must still
weigh a series of factors to determine whether Fitbug's delay in
bringing suit was reasonable. Specifically, these factors, the so-
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called E-Systems factors, direct the Court to analyze "(1) the
strength and value of the trademark rights asserted; (2)
plaintiff's diligence in enforcing [the] mark; (3) harm to [the]
senior user if relief is denied; (4) good faith ignorance by [the]
junior user; (5) competition between [the] senior and junior users;
and (6) [the] extent of harm suffered by the junior user because of
[the] senior user's delay." E-Systems, Inc. v. Monitek, Inc., 720
F.2d 604, 607 (9th Cir. 1983); see also Tillamook, 465 F.3d at
1108.
The first two factors weigh in Fitbit's favor. First, while
both Fitbit's and Fitbug's marks are descriptive or suggestive, and
thus relatively weak, see Grupo Gigante, 391 F.3d at 1102
("Descriptive or suggestive marks are relatively weak.") (citing
Accuride Int'l Inc. v. Accuride Corp., 871 F.2d 1531, 1536 (9th
Cir. 1989); ATM Express, 2009 WL 2973034, at *4, on balance,
Fitbit's mark is substantially more valuable by virtue of its
"rapid and continuing growth" relative to Fitbug. See E-Systems,
720 F.2d at 607. As a result, this factor weighs in Fitbit's
favor. Second, as discussed throughout the foregoing analysis,
Fitbug was not diligent in protecting its mark and did not assert
its trademark rights against Fitbit's from September 2008, when
Fitbit announced its products and began offering them for sale on
its website, to December 2011, when it sent a cease and desist
letter to Fitbit, and did not file suit until 2013. As the Court
has explained, this delay was not justified, and accordingly this
factor weighs against Fitbug.
The third factor and fifth factors either weigh in Fitbug's
favor or can be assumed to do so for the sake of argument. The
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third factor, the harm to Fitbug if relief is denied, "turns
largely on the court's analysis of the likelihood of confusion."
RSI, 2012 WL 3277136, at *18 (citing Grupo Gigante, 391 F.3d at
1103). But here, the Court cannot find that the likelihood of
confusion standard is satisfied as a matter of law because there
are genuine issues of material fact as to several of the Sleekcraft
factors. See 559 F.2d at 348-49. In particular, there are
disputed factual issues going to the existence of actual confusion,
as well as the similarity of the parties' marks and sophistication
and care "likely to be exercised by the purchaser[s] . . . ." Id.
at 348; see Fitbit Opp'n at 16-22 (detailing these factual
disputes). As a result, the Court cannot decide likelihood of
confusion (and hence the weight of this factor) as a matter of law.
Nonetheless, even assuming this factor weighs strongly in Fitbug's
favor, as the fifth factor, competition between the users, does,
see RSI, 2012 WL 3277136, at *18 (citing Grupo Gigante, 391 F.3d at
1104) (noting that where both parties offer "similar products to
the same companies in the same market, [the competition between
users] factor plainly weighs against a finding of laches"), it
would still be insufficient to sway the overall weight of the
factors.
The remaining factors, good faith ignorance by Fitbit and the
harm suffered by Fitbit as a result of Fitbug's delay weigh in
Fitbit's favor as well. First, while it is undisputed that Fitbit
was aware of Fitbug's existence prior to announcing or selling its
products, it is also undisputed that Fitbit selected its mark
before it was aware of Fitbug, and even after learning of Fitbug's
existence, Fitbit continued to believe there was no likelihood of
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confusion. Because this factor focuses on whether "[Fitbit] had
prior knowledge of [Fitbug] when it decided to adopt the name
[Fitbit]," this factor weighs in Fitbit's favor. Internet
Specialties, 2006 WL 4568073, at *4, aff'd 559 F.3d 985 (9th Cir.
2008) (emphasis added). Furthermore, because Fitbit "has continued
to build a valuable business around its trademark during the time
that [Fitbug] delayed the exercise of its legal rights," it has
suffered "expectation" or "economic prejudice." Grupo Gigante, 391
F.3d at 1105; see also Danjaq, 263 F.3d at 956 (discussing economic
prejudice); McCarthy § 31:12 (discussing expectation prejudice).
Here, Fitbit has provided substantial evidence detailing its
efforts through the period of Fitbug's delay to build its business,
generating substantial sales, hiring large numbers of employees,
and developing products, all of which it offers under the well-
known Fitbit mark. Those efforts, and Fitbit's products, have
garnered awards and substantial media coverage. The economic
prejudice would be severe if Fitbit were to now lose the rights to
the Fitbit name. See Saul Zaentz, 627 F. Supp. 2d at 1118
(reaching a similar conclusion where the defendant had spent
millions of dollars on advertising, appeared on television
promoting its business, and generated substantial goodwill under
its existing name).
Nevertheless, Fitbug argues, relying on two out-of-
jurisdiction authorities, that Fitbit cannot be prejudiced because
Fitbit knew of Fitbug's rights prior to making these investments.
See Roederer v. J. Garcia Carrion, S.A., 569 F.3d 855, 859 (8th
Cir. 2009); Perini Corp. v. Perini Constr., Inc., 715 F. Supp. 719,
725 (D. Md. 1989), rev'd on other grounds, 915 F.2d 121 (4th Cir.
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1990). But Fitbit points out that the Ninth Circuit and other
courts have found prejudice even where the defendant was aware of
the plaintiff's existence prior to the prejudice occurring. See,
e.g., Danjaq, 263 F.3d at 956; Saul Zaentz, 627 F. Supp. 2d at 1118
(finding the defendant would suffer economic prejudice even though
it chose its business name with full knowledge of the plaintiff's
mark). Furthermore, one of the cases on which Fitbug relies for
this argument, Roederer, applied this limitation on prejudice only
where "plaintiff objected to the use of the mark." 569 F.3d at
859. However as the Court found earlier, Fitbug did not object to
Fitbit's use of its mark until its cease-and-desist letter in
December of 2011, after Fitbit had already expended substantial
effort building up good will in its mark. As a result, the Court
rejects this argument and finds that Fitbit's claim of laches is
supported by substantial economic prejudice.
Considering the above factors, the Court finds they weigh in
Fitbit's favor. Nonetheless, Fitbug has one remaining argument:
that Fitbit's willful infringement bars it from asserting laches.
Because laches is an equitable doctrine, the exception to
laches for willful infringers stems from "the equitable maxim that
'he who comes into equity must come with clean hands.'" Danjaq,
263 F.3d at 956 (9th Cir. 2001) (quoting Hermes Int'l v. Lederer de
Paris Fifth Ave., Inc., 219 F.3d 104, 107 (2d Cir. 2000)). This
rule was originally applied by Judge Hand in the copyright piracy
context and was subsequently applied to "intentional and
fraudulent" trademark infringement by the Ninth Circuit. See Nat'l
Lead Co. v. Wolfe, 223 F.2d 195, 202 (9th Cir. 1955) (citing
Menendez v. Holt, 128 U.S. 514, 523 (1888)); Haas, 234 F. at 108.
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Hand mused that while all would agree "that it is inequitable for
the owner of a copyright, with full notice of an intended
infringement, to stand inactive while the proposed infringer spends
large sums of money in violation, and to intervene only when his
speculation proved a success," such a course of conduct by a
copyright owner "might be irrelevant" if "the defendant [is] a
deliberate pirate . . . ." Haas, 234 F. at 108.
In Danjaq LLC v. Sony Corp., the Ninth Circuit held that the
Copyright Act's definition of willful infringement -- infringement
that occurs "'with knowledge that the defendant's conduct
constitutes copyright infringement'" -- is the standard by which
courts should assess whether willful infringement bars the
application of laches. 263 F.3d at 957 (quoting Columbia Pictures
Television v. Krypton Broad., 106 F.3d 284, 293 (9th Cir. 1997)
(alterations and omissions in original) rev'd on other grounds sub
nom. Feitner v. Columbia Pictures Television, 523 U.S. 340 (1998)).
At least one other district court in the Ninth Circuit has applied
this standard to trademark infringement, and the parties do not
dispute that it applies here. See FLIR Sys. Inc. v. Sierra Media,
Inc., 965 F. Supp. 2d 1184, 1210 (D. Or. 2013).
Fitbug points to four facts that it believes demonstrate
willful infringement. First, "it is undisputed that Fitbit learned
about Fitbug nearly two years before selling any products (and
nearly one year before even announcing such products)." Fitbug
Opp'n at 3. Second, pointing to screenshots of Fitbit's and
Fitbug's websites, Fitbug argues that "Fitbit . . . borrowed
significant design elements from Fitbug's website, marketing
materials, and original logo." Id.; Landau Decl. Exs. 15-18.
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Third, Fitbit continued using its marks after receiving a cease and
desist letter from Fitbug alleging infringement. Finally, Fitbug
disputes Fitbit's view that "it began using the FITBIT mark before
learning of Fitbug's prior rights in FITBUG." Fitbug Opp'n at 3
n.2.
The willfulness exception is inapplicable here because Fitbug
can show "at most only infringement, not willful infringement,"
Danjaq, 263 F.3d at 942, and Fitbug has offered no evidence
"demonstrating that [Fitbit] 'employed the alleged infringing mark
with the wrongful intent of capitalizing on its goodwill.'" RSI
Corp. v. IBM Corp., No. 5:08-cv-3414-RMW, 2012 WL 3277136, at *20
(N.D. Cal. Aug. 9, 2012). First, while it is undisputed that
Fitbit learned about Fitbug prior to announcing or selling its
products, in the bad faith infringement context numerous courts
have found that "[p]rior knowledge of a senior user's trademark
does not necessarily give rise to an inference of bad faith and may
be consistent with good faith." Arrow Fastener Co. v. Stanley
Works, 59 F.3d 384, 397 (2d Cir. 1995); see also McCarthy § 23:115
at n.13 (collecting cases). Nevertheless, Fitbug suggests that the
Court should infer bad faith here because "defendant had knowledge
of plaintiff's mark 'and 'just happened' to choose a mark
confusingly similar to plaintiff's mark.'" Fitbug Opp'n at 3 n.2
(quoting McCarthy, supra, at § 23:115). But this overstates the
facts. First, as the Court discussed earlier, there is no evidence
that Fitbit was aware of Fitbug's mark at the time it chose the
Fitbit name. Instead, the record simply demonstrates that Fitbit
was ignorant of Fitbug's existence until late 2007, after it chose
the Fitbit name but before it announced or began marketing its
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products under that name. Furthermore, even though Fitbit was
aware of Fitbug prior to announcing or marketing its products,
Fitbug provides no evidence disputing Fitbit's asserted good faith
belief that its use is not infringing and nothing showing a
"wrongful intent of capitalizing on [Fitbug's] goodwill." RSI,
2012 WL 3277136, at *20 (quotation omitted). On the contrary, it
is undisputed that, at the time he learned of Fitbug, Fitbit's CEO
believed the names were not confusingly similar. As the Ninth
Circuit has recognized, citing approvingly a case from the Sixth
Circuit, "a knowing use in the belief that there is no confusion is
not bad faith." Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d
1400, 1406 (9th Cir. 1993) (citing Nalpac, Ltd. v. Corning Glass
Works, 784 F.2d 752, 755 (6th Cir. 1986)).
As a result, the Court finds that willful infringement does
not bar Fitbit from invoking laches, and Fitbug's claims are time-
barred. Accordingly, Fitbit's motion for summary judgment on the
issue of laches is GRANTED. Further, because Fitbug's claims are
time-barred, the portion of Fitbit's motion for summary judgment
addressing acquiescence need not be addressed, and Fitbug's motion
for summary judgment on likelihood of confusion is DENIED as moot.
B. Fitbit's Fifth and Sixth Counterclaims
The only remaining issue is Fitbug's motion for summary
judgment as to Fitbit's fifth and sixth counterclaims, which assert
claims for violations of California's Unfair Competition Law
("UCL") and False Advertising Law ("FAL"). See Cal. Bus. & Prof.
Code §§ 17200; 17500. These causes of action relate to allegations
that Fitbug violated the UCL and FAL by posting online reviews and
comments about Fitbit products or comparing Fitbit's products to
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Fitbug's without disclosing their affiliations with Fitbug.
Fitbug argues that it is entitled to summary judgment on these
claims because Fitbit cannot satisfy the requirement that a UCL or
FAL plaintiff demonstrate it "suffered injury in fact and . . .
lost money as a result of" the unfair competition or false
advertising. See Id. §§ 17204; 17535. Because a UCL or FAL
plaintiff must demonstrate an economic injury and demonstrate that
"the misrepresentation was an immediate cause" of the injury
suffered, standing under the UCL and FAL is "substantially narrower
than federal standing under [A]rticle III." In re Tobacco II
Cases, 46 Cal. 4th 298, 326 (Cal. 2009) (internal citation and
quotation marks omitted); see also Kwikset Corp. v. Super. Ct., 51
Cal. 4th 310, 323-24 (Cal. 2011).
The background of this issue is somewhat convoluted, but it
stems from a stipulation the parties entered into in response to
Fitbit's desire to amend its counterclaims late in the discovery
process. When Fitbit sought to amend its counterclaims, Fitbug
apparently sought to depose a Fitbit representative regarding those
counterclaims. Fitbit initially agreed, but then the parties
reached an agreement that, in exchange for not providing the
witness for deposition, Fitbit and Fitbug would stipulate that,
among other things, Fitbit did not have evidence of "particular
instances where individuals who otherwise would have purchased
Fitbit products instead purchased Fitbug products in reliance on or
as a result of Fitbug's conduct" that allegedly violated the UCL
and FAL. ECF No. 49 ("Rosenberg Decl.") Ex. 17 at ¶ 1.
In response, Fitbit points to several cases holding that, in
the Lanham Act context, injury in fact may be presumed for
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intentionally deceptive advertising. See Southland Sod Farms v.
Stover Seed Co., 108 F.3d 1134, 1146 (9th Cir. 1997); U-Haul Int'l,
Inc. v. Jartran, Inc., 793 F.2d 1034, 1040 (9th Cir. 1986); Nat'l
Prods., Inc. v. Gamber-Johnson LLC, 699 F. Supp. 2d 1232, 1241
(W.D. Wash. 2010). But these cases do not rebut Fitbug's argument.
Fitbug's argument is that, as a matter of California law, the
statutory standing requirement imposed by Business and Professions
Code Sections 17204 and 17535 require Fitbit to demonstrate an
economic injury cognizable under the UCL or FAL. These cases only
address those requirements in the context of the Lanham Act, and
are thus inapposite.
Next, Fitbit points to California cases holding that a UCL or
FAL plaintiff can satisfy the statutory standing requirements in
"innumerable ways" and that "the quantum of lost money or property
necessary to show standing" under the UCL and FAL is "only so much
as would suffice to establish injury in fact and it suffices to
allege some specific, identifiable trifle of injury." Law Offices
of Matthew Higbee v. Expungement Assistances Servs., 214 Cal. App.
4th 544, 561 (Cal. Ct. App. 2013) (citations and internal
quotations omitted). However, Fitbit cannot satisfy even that
standard. Instead, Fitbit's sole basis for asserting an injury
under the UCL and FAL is speculation. While Fitbit points out that
Fitbug saw an increase in web traffic and sales following the
alleged UCL and FAL violations, Fitbit cannot connect that increase
with any "quantum of lost money or property" it suffered. Id.
Similarly, while Fitbug internally estimated that this campaign
would generate significant revenues, there is nothing in the record
demonstrating that the campaign actually was responsible for any
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loss of money or property by Fitbit.
As a result, Fitbit has failed to demonstrate even a
"specific, identifiable trifle of injury" sufficient to satisfy the
standing requirements of the UCL or FAL. Id. Accordingly,
Fitbug's motion is GRANTED as to Fitbit's fifth and sixth
counterclaims.
V. CONCLUSION
For the reasons set forth above, Fitbit's motion for summary
judgment on the grounds of laches is GRANTED. Because Fitbug's
claims are time-barred, the Court need not address Fitbit's
arguments for summary judgment on the grounds of acquiescence, and
Fitbug's motion for summary judgment on the grounds of likelihood
of confusion is DENIED as moot. Fitbug's motion for summary
judgment on Fitbit's fifth and sixth counterclaims is GRANTED.
Because, based on the Court's review of the parties' pleadings this
order fully disposes of the parties' claims, the trial date,
pretrial conference, and all other pretrial deadlines are hereby
VACATED.
IT IS SO ORDERED.
Dated: January 26, 2015
UNITED STATES DISTRICT JUDGE